Cayman beneficial ownership laws take effect

The Cayman Islands on July 1 began to operate under new laws that will introduce a technology-based system to enhance its existing regime of maintaining and exchanging information about the true owners of Cayman-registered entities.

The system is aimed at improving the speed of providing beneficial ownership information to U.K. law enforcement authorities.

A three-person team from the U.K. Foreign and Commonwealth Office and the National Crime Agency visited Cayman on June 26 and 27 to discuss Cayman’s implementation of the system with officials from the ministry of Financial Services.

Dax Basdeo, the ministry’s chief officer, said, “In addition to satisfactorily answering their questions about the enhanced speed with which information will be shared, we briefed the U.K. team on the system’s design, in relation to ensuring that our constitutional matters of privacy and data protection were maintained.”

Because of data security concerns, especially concerning hacking, the ministry has opted for a so-called “air-gapped platform” that is not connected to the internet or any other network, but hosted offline. The system will require financial services providers to maintain their own beneficial ownership registers and upload the information once a month to an encrypted flash drive, which has to physically be taken to the Government Administration Building.

There, the information about the true owners of Cayman-based companies and other entities will be uploaded via a dedicated, secured transfer terminal.

“Financial crime is a serious global problem that requires a unified global response,” said Minister of Financial Services Tara Rivers. “As a jurisdiction, the Cayman Islands continues to play a significant role on international regulatory issues and for implementing global practices to fight financial crime; we have been recognized for decades as a strong international partner in combating corruption, money laundering and tax evasion.”

The system provides a secure mechanism for sharing beneficial ownership information on Cayman’s exempt, limited liability, and non-resident companies with the U.K., the ministry said in a press release.

By August this year, beneficial ownership information on local small businesses will also be collected.

The new technology platform was designed after consultation with the private sector.

Jude Scott, CEO of industry body Cayman Finance, said Cayman “plays a critical role in the success of the global financial economy.

“The Cayman Islands government, the Cayman Islands Monetary Authority and the private sector have worked continuously over many decades with overseas governments to ensure we are a strong partner in combating global financial crime. Cayman stands ready to collaborate as and when needed,” he said.

The ministry noted that as with all of Cayman’s international cooperation mechanisms, only competent authorities will be able to exchange beneficial ownership information.

In Cayman, the beneficial ownership competent authority is the minister of Financial Services, who will delegate authority to the Financial Crime Unit, which will receive requests from U.K. law enforcement.

The Financial Crime Unit must verify that any request is part of an ongoing investigation and that the alleged offense is also a criminal offense under Cayman Islands law, to prevent so-called “fishing expeditions” or wholesale requests for data.

The information that is provided in response to legitimate requests includes the names, addresses, dates of birth, passports or other identification documents, as well as the dates when each individual became or ceased to be a beneficial owner.

The General Registry will hold the beneficial ownership data and the search platform.

Cayman and the U.K. agreed in April 2016 to improve the exchange of beneficial ownership information, as outlined in a document called the Exchange of Notes and Technical Protocol. All U.K. Overseas Territories entered into similar agreements.

Since then, Cayman has passed amended legislation, new regulations and guidance notes for industry in order to provide the legal framework upon which the system was enhanced.